US PRESIDENT George W Bush faced mounting pressure this weekend to push through a $700 billion bailout for vulnerable financial institutions after bank shares came under fresh attack in the wake of the country's biggest banking failure.
Republicans who opposed compromise on Thursday rejoined the negotiations late yesterday, prompting speaker of the House Nancy Pelosi to say the talks were "back on track".
Meanwhile, after two days of uncertainty following Republican contender John McCain's call for a postponement in campaigning, the first presidential debate went ahead at the University of Mississippi last night.
Although the debate was due to focus on foreign policy and national security, the candidates were also expected to address the financial crisis and the proposed state bailout of distressed mortgage assets.
Mr Bush went on television yesterday after regulators seized control of Washington Mutual and sold it quickly to JPMorgan Chase, to declare his administration would "rise to the challenge" of brokering a deal. The plan would involve the biggest government intervention in the financial system since the Great Depression.
The opening of Asian markets on Sunday night is now seen as the effective deadline for the government to secure a deal. After a tentative agreement between congressional Democrats and Republicans collapsed in disarray at a contentious meeting in the White House two days ago, efforts to retrieve the deal continued yesterday, and were likely to continue throughout the weekend.
Wachovia, the sixth-largest US lender by assets, lost more than a quarter of its value yesterday as western central banks resumed their co-ordinated efforts to pump liquidity into frozen money markets. Late last evening, it was reported in New York that Wachovia had entered preliminary talks with Citigroup about a potential merger, and with other groups including Banco Santander and Wells Fargo.
The financial crisis has diverted the attention of the two presidential candidates in recent days and, yesterday, both campaigns were seeking to lower expectations ahead of last night's debate.
Barack Obama went into the debate with a clear lead in recent national polls and ahead in most battleground states, and Mr McCain's supporters acknowledged privately that the Republican had to perform well last night to change the momentum of the race.
Meanwhile, Taoiseach Brian Cowen said he hoped an outcome would emerge from Washington which would signal to markets a "preparedness to deal with the fundamental problem which the subprime crisis brought about".
Speaking at a British-Irish Council meeting in Scotland yesterday, Mr Cowen said: "From our point of view the need to create a sense of direction and confidence [for] international markets is an absolute priority. I would hope that discussions that are ongoing in Washington will bring about the solution that we all seek."